Slowdown in US growth but car sales accelerate

Economic growth in the US cooled in the first quarter as businesses cut back on investment and restocked shelves at a moderate pace, but stronger demand for cars softened the blow.

Gross domestic product (GDP) expanded at a 2.2 per cent annual rate, down from the fourth quarter’s 3 per cent rate.

While that was below economists’ expectations for growth of 2.5 per cent, a surge in consumer spending took some of the sting from the report.

Consumer spending, which accounts for about 70 per cent of US economic activity, increased by 2.9 per cent – the fastest pace since the fourth quarter of 2010.

Americans stepped up spending on cars in the first quarter, with sales rising by the most in four years. Part of that reflected pent-up demand after last year’s earthquake and tsunami in Japan disrupted supplies and left showrooms bereft of popular models.

“The markets will be disappointed by this number but you shouldn’t knock growth,” said Jason Conibear, sales director at foreign exchange specialist Cambridge Mercantile.

“Growth is an increasingly rare commodity in the global economy but the US has got it.”

On Wednesday, official figures showed the UK economy had fallen back into recession in the first quarter, with a 0.2 per cent drop in GDP.

That followed a 0.3 per cent contraction at the end of last year, triggering the UK’s first double-dip recession since the 1970s.

GARETH MACKIE